Large companies are lining up to win Sydney's most lucrative bus contracts as expectations grow that the Baird government will open to tender services that have been run for decades by the heavily unionised State Transit Authority.

While Keolis Downer and Transit Systems are eager to bid, any decision to allow them and other private operators to compete for contracts now held by the government-owned STA is likely to meet stiff opposition from unions.

In an interview with Fairfax Media, Keolis Downer chief executive Campbell Mason said the company was interested in bidding for the STA bus operations if those contracts came up for private tender next year.

"We are a very willing participant in the privatisation process and looking forward to that franchising program moving ahead," he said.

"We believe there is an improvement in customer service and cost savings that can be generated through franchising, as has been demonstrated elsewhere."

Newcastle's light rail, bus and ferry services will be run by a single operator.

But the union representing thousands of Sydney bus drivers says it fears private operators will slash bus services "to put money into the hands of shareholders".

"We would be worried about the cuts in services, the cuts in maintenance and the cuts in wages and conditions of drivers who live in the most expensive city in Australia," the secretary of the Rail, Tram and Bus Union's bus division, Chris Preston, said.

"We would run a very loud campaign if the government said they were to privatise STA [bus contracts]. It has been in public hands for about 80 years."

While private companies such as Hillsbus and Transdev operate bus services in Sydney, STA-run Sydney Buses still carries the majority of the city's passengers.

The STA contracts cover the CBD, the northern beaches, Paramatta, the eastern suburbs and south to suburbs such as Mascot.

The government-owned authority has 12 bus depots in Sydney and about 3700 drivers, almost all of whom are members of the RTBU.

Sydney has become a key market for Keolis Downer to target because of its booming population and growing demands for public transport. "Hence our appetite for the STA franchising as that rolls forward," Mr Mason said.

The company is a joint venture between Australian engineering company Downer EDI and French transport giant Keolis, and it is in the race to win the right to be the sole operator of Newcastle's bus, light rail and ferry services.

The Newcastle contract has been regarded as a template for what the Baird government will consider rolling out elsewhere in the state.

Brisbane's Transit Systems has also bid for the Newcastle contract and is eager to do the same in Sydney if the STA contracts are opened up.

Transport for NSW said a decision had yet to be made on the STA contracts, which would expire in mid-2018. The contracts had an option for the transport authority to extend them for up to two years, a spokesman said.

The "proposed service approach" for the operation of the B-Line bus services to the northern suburbs was also still under consideration, he said.

While Transit Systems already operates bus services in western Sydney, Keolis Downer is yet to break into that part of the market in Australia's largest city despite operating buses in Western Australia, South Australia and Queensland.

Keolis executive chairman Jean-Pierre Farandou said the company operated many public passenger networks across the world, including bus and light rail services, and was "used to working with unions".

"We have developed methods to understand better the needs of the customer and to deliver more personal services to them," he said.

Mr Farandou, who recently visited Australia, said its international software could be used to help reduce the cost of scheduling services and "offer better value for money".

"'We are very keen to work in Sydney or NSW in general because we are in most of the major cities in Australia – Melbourne, Brisbane, Adelaide, Perth – but we are not in Sydney," he said.

Keolis Downer runs Melbourne's Yarra Trams and the light rail line on the Gold Coast.

While a consortium that includes Transdev and Alstom has won the contract to run Sydney's new $2.1 billion tram line to the south east, Keolis Downer is interested in playing a role in the light rail line planned for Parramatta.

Mr Mason said the company was eager to see what procurement model was chosen for the delivery of the Parramatta project.

"Certainly it is a project we are very interested in operating," he said.